The issue was due to go before a Premier League tribunal next month but has now been resolved.

Aston Villa have agreed to pay Norwich compensation for signing the Scot and Norwich have agreed to pay Lambert a bonus for the 2011-12 season.

Lambert, 43, left Carrow Road in the summer after three years in which he had led Norwich to successive promotions and 12th place in the Premier League.

Norwich claimed they were due to be paid compensation by Villa, whereas Lambert argued he had resigned from the club, effectively becoming a free agent.

Norwich chairman Alan Bowkett revealed that Lambert was suing the club for payment of the bonus at a fans’ forum earlier this season.

Lambert said he was upset the matter had been made public, and then revealed that Norwich were suing him for payment of the compensation they believed they were owed.

Norwich and Villa issued a joint statement on Sunday, which read: “Paul Lambert, Norwich City and Aston Villa have agreed settlement in respect of the dispute regarding Paul Lambert’s departure from Norwich City.

“Villa will pay Norwich City the original amount as agreed in the contract between Paul Lambert and Norwich City, and Norwich City will pay Paul Lambert the bonus he was entitled to after completion of the 2011-12 season.

“This represents a final settlement of all claims and disputes between the parties. No further comment will be made.”